algorithmic trading

Traditional risk controls, the CFTC observes, were designed for human judgment and human speed, and they must be reevaluated in light of the “electronic trading platforms that can execute repetitive tasks at speeds orders of magnitude greater than any human equivalent.

The CFTC today released a concept release relating to risk controls and system safeguard for automated trading. Among the issues addressed are pre-trade risk controls, post trade reports and system safeguards to promote safe and orderly markets.

For all the efforts to shore up electronic markets in the aftermath of one of America’s biggest trading catastrophes, yesterday’s options malfunction by Goldman Sachs Group Inc. shows the dangers haven’t gone away.

The corporate bond market is unsuitable for full electronic trading, according to a study by McKinsey & Co. and Greenwich Associates, even as Goldman Sachs Group Inc. and BlackRock Inc. expand their own systems.

A paper written by Adam Clark-Joseph may have lit a fuse, and may yet set off debate over transparency in the high-frequency trading world, and the role of regulators in protecting (or spilling) trade secrets.